Tel Aviv: One Of The World's Most Creative Cities

Innovation can happen anywhere. It shouldn&#8217;t be solely entrusted to Cupertino or Mountain View nor should it be limited to self-styled visionaries in New Balance sneakers. But it does seem to happen in clusters. Why Silicon Valley? Why Waterloo? Because creativity is cultural. For the better part of a decade, the Martin Prosperity Institute at U of T&#8217;s Rotman School of Management has been studying the complex web of factors that encourage and sustain innovation in regions around the world. First published in 2004, the institute&#8217;s Global Creativity Index measures a nation&#8217;s innovation potential, focusing on what it calls the Three Ts: technology, talent and tolerance. We used this index, but also dove deeper, to choose cities that are best positioned to nurture their creative edge into the future. "The GCI is really trying to help regions understand where they are," explains Kevin Stolarick, research director of the Martin Prosperity Institute. "Even when times are good, you have to worry about what comes next." Here are five cities &#8212;and some of their start-ups&#8212;that we think have very bright futures.

The entire population of Israel may only number seven million&#8212;smaller than New York City&#8212;but this Middle Eastern state spends more of its GDP on research and development than any other nation. And it shows. In April, 2011, Israeli software start-ups PicApp and PicScout sold for a combined $30 million (all currency in U.S. dollars) to Indian and American buyers, respectively. A month later, cellular company Provigent was snapped up by U.S. chip maker Broadcom for $313 million, while Google paid $70 million for app developer Snaptu. In September, eBay bought e-commerce site The Gifts Project for a reported $20 million. All are start-ups. All have offices in or near Tel Aviv. In the first three quarters of 2011 alone, 422 Israeli start-ups raised $1.57 billion in venture capital, and an estimated 250 multinationals maintain R&D operations there. What makes Silicon Wadi&#8212;as the coastal region between Tel Aviv and Jerusalem is known&#8212;so special? Some say that a service requirement in the country&#8217;s famously high-tech military has given many young Israelis a technological sophistication that bolsters creativity and inventiveness. What we do know is that while Tel Aviv is small, it&#8217;s one giant innovation engine

We believe generally in the United States, we believe in ourselves and what a young country can achieve. Israel, since 1948, now a major factor in commerce and in the world. It's a smaller replica of what has been accomplished here and I think Americans admire that. They feel good about societies that are on the move.

Iscar is exceptional. I can give you an absolute, unequivocal answer You can go around the world and it's very impressive when a country of 7 million people turns out a business like this. I haven't seen anything like this in the United States. We were measuring Iscar against everything we see in the world.

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Israel, a New Jersey-sized nation of 7.5 million people (1.7 million of whom are Arab) filed 7,082 international patents in the five years ending in 2007. By contrast, 28 majority-Muslim nations with almost 1.2 billion people  155 times the population of Israel  were granted 2,071 patents in the same period. Narrowing the comparison to the 17 Muslim nations of the Middle East from Morocco to Iran and down the Arabian Peninsula, the 409 million people in that region generated 680 patents in five years.
This means that the Arab and Iranian world produced about one patent per year for every 3 million people, compared with Israel's output of one annual patent for every 5,295 people, an Israeli rate some 568 times that of Israel's neighbors and sometime enemies.

The awarding of Nobel Prizes in the quantitative areas of chemistry, economics and physics shows a similar disparity, with five Israeli winners compared with one French Algerian (a Jew who earned the prize for work done in France) and an Egyptian-American (for work done at Caltech in California).

But wealth isn't the sole explanation for this disparity in intellectual innovation. Saudi Arabia enjoyed a per capita income of $24,200 in 2010. Yet the Kingdom averages an anemic 37 patents per year compared with Israel's 1,416 per year  and there are 3 1/2 times more Saudis than Israelis, meaning that Israel's per capita output of intellectual property is 132 times greater than Saudi Arabia's.

The telltale signs of Israel's economic rise can be seen in the Tel Aviv skyline and the new office complexes around Jerusalem. International giant Teva Pharmaceutical Industries Ltd. was founded in 1901 by three pharmacists in Jerusalem. Today it employs 40,000 around the world. Teva has a market cap of $44.2 billion  the most highly valued company based in Israel and the ninth-largest firm traded on the Nasdaq

A few miles from Teva's gleaming office campus west of the Old City sits the former national mint building for the British Mandate. Built in 1937, this renovated building, along with the old Ottoman Empire railway warehouses next to it, houses the JVP Media Quarter and 300 entrepreneurs.

The complex hosts Israel's leading venture capital firm, Jerusalem Venture Partners, as well as 35 startups and a performing arts center for good measure. JVP, which has helped launch 70 companies since 1993, has more than $820 million under management with seven active venture capital funds.

The Media Quarter concept was created in 2002 when JVP founder Erel Margalit wanted to create a media-focused incubator that combined technology, culture, art and business. JVP has shepherded 18 initial public offerings, mergers and acquisitions, including some of the largest Israel-based companies: Qlik Technologies, Netro Corp., Chromatis Networks, Precise Software, Cogent Communications.

Less than 300 miles separate the purposeful creative buzz in the JVP Media Quarter from the restive streets of Cairo, where the Muslim Brotherhood tells Egypt's unemployed that their plight is the fault of corrupt capitalists and Jews. It doesn't take a Nobel Prize-winning economist to figure out where these two economies are going.

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